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Posts from the ‘Multi Asset Advisors’ Category

Complex Systems, Collapse, and Virtual Connections at the Milken Global Conference

There’s been a lot of talk (and blogging) this week about the Milken Global Conference that’s going on in Los Angeles. I wasn’t able to attend in person this year, but, after looking at their website, I’m amazed at how much of the conference can be experienced virtually. The majority of the sessions are posted to their website within a few hours of their completion. After looking around, I was struck by the connections you can make at the Milken Global Conference. I’m not talking about the networking type of contacts – networking from 1,700 miles away is difficult, at best. No, I’m talking about how the conference’s melding of business, political, and academic leaders can serve to demonstrate the similarities in our experiences, whether they’re separated by thousands of miles or millennia.

As an example, I watched a panel discussion called “The Rise and Decline of Nations and Civilizations,” whose participants included Pulitzer Prize-winning author and UCLA professor Jared Diamond, and best-selling author and Harvard professor Niall Ferguson. Read more

Coding Errors and Challenging Assumptions: Why the Debate over Reinhart-Rogoff Matters

Last week, the economics blogosphere was ablaze with commentary on an economics paper from 2010 called “Growth in the Time Debt.” The paper was by Carmen Reinhart and Kenneth Rogoff, both of Harvard, and has come to be known as just “Reinhart-Rogoff.” What’s so big about a three-year-old economics paper? Well, most of the current calls for austerity in the U.S. and around the world cite this paper as the major influence in cutting government spending…oh, and the conclusions of the paper turn out to be wrong. Read more

Fed Conference in Hotlanta: Part 2 – Sweating the Details on Regulatory Efficiency

Continuing my previous thoughts on last week’s Atlanta Federal Reserve Financial Markets Conference, I thought I’d cover another of the conference’s big themes: the efficiency of the regulatory system.

Two things matter to a well-functioning regulatory system: the complexity in the regulation and the political system that backs up that regulation. Political systems matter because of the potential influence on a majority party. Democracies where one party cannot easily take control (political economists call them “liberal democracies”) are least likely to have banking crises.  This is because liberal democracies such as Canada and New Zealand are less likely to have one party in the majority, one party whose special interests form the regulation of the banking system.

Complexity also matters. Read more

What Ever Happened with the Payroll Tax Increase?

As you may recall, earlier this year, payroll taxes in the U.S. went up by 2% and I discussed how that tax increase could potentially affect spending.  Well, we’re done with first quarter, so how have consumers reacted to that $16 less (based on average weekly earnings on non-farm payrolls) in take-home pay each week?

  • Consumer spending increased the first two months of the year (up 0.7% in February and up 0.4% in January).
  • Consumer confidence took a temporary hit in January, and then generally recovered in February and March.

And, here’s the real kicker, according to a survey recently done by, almost half of Americans surveyed (48%) didn’t even notice the payroll tax increase. Read more

Live from Des Moines, It’s Chicago Fed President Charles Evans

The President of Federal Reserve Bank of Chicago came to speak at the CFA Society of Iowa Strategy Dinner last night and I was lucky enough to attend.   Although, we did  not learn anything really new from the speech, Evans  nicely summarized the Fed’s motivation for implementing the unemployment and inflation thresholds that are his namesake along with the reiterating that the Fed will not remove accommodation, whether it be QE or the near zero federal funds rate too quickly.    His view on the economic growth was pretty optimistic.  Evans stated,

I am optimistic that we have appropriate policies in place to help the economy achieve escape velocity by 2014. So, after rising a disappointing 1-1/2 percent in 2012, real gross domestic product (GDP) should increase in the range of 2-1/2 to 3 percent this year and then grow between 3-1/2 and 4 percent in 2014, according to my forecast. This growth ought to be sufficient to bring the unemployment rate close or maybe even a little below 7 percent by the end of next year.” Read more

Minimum Wage Hikes Part III: Minimum Wages and Federal Assistance

Continuing the thoughts from the post I had on Valentine’s Day, I wanted to address a few of the questions I received surrounding the proposed hike to the federal minimum wage. During his State of the Union speech, President Obama stated that a full-time worker earning the current federal minimum wage of $7.25 per hour would fall below the poverty line. So the question popped up, what’s the relationship between low-wage workers and those who require government assistance?

Well, I was able to track down some research through the Office of The Assistant Secretary for Planning and Evaluation (that’s in the U.S. Department of Health & Human Services), and it paints an interesting picture.

The first thing to realize is that not everyone earning around the minimum wage is in dire economic straits. Read more

Yes, Your Paycheck Was Smaller Last Week…

After the fiscal-cliff deal, the payroll tax rate – income withheld from our paychecks for social security – went up from 4.2% to 6.2%.  For the last two years, American employees were paying a little bit less in social security withholding and the jig was up last week. This rate increase is an effective increase in taxes of about $16 per week  (or about $850 per year) for the average American worker.

What does this reduction in income mean for economic growth for 2013?  A lot of retailers are concerned that, with less money in their pockets, Americans will spend less. In line with economic theory (taxes increase, demand goes down), many economists forecast that the payroll tax cut will have drag on consumer spending for the year (J.P Morgan expects 0.6% drag on growth, Goldman expects the same drag, Credit Suisse expects consumption spending to move from 2% in Q4 2012 to 1.5% in Q1 2013).  We also think the payroll tax cut may have a bit of drag on consumer spending (here and here) in the first half of the year, along with the other changes in tax policy and uncertainty surrounding sequestration and the debt ceiling.  Read more